1. Trends
in
startups
and
early-‐
stage
financings
November
7,
2014
Elton
Satusky
Wilson
Sonsini
Goodrich
&
RosaF
East
Meets
West
Conference
Honolulu,
HI
2. The
Big
Picture
• Venture
Capital
– Amount
of
venture
investment
is
fairly
steady
in
recent
years
– consolidaFon
occurring;
fewer
funds
controlling
more
of
the
investment
$
• Early
Stage
Financings
– VCs
less
likely
to
play
in
early
stage;
bootstrapping
more
common
– angels,
super
angels
and
incubators
filling
some
of
the
void
– Series
Seed
and
converFble
debt
more
prevelant
– Crowdfunding
3. VC
Overview:
The
Good
News
• Funds
raised
more
money
in
Q1-‐Q3
‘14
than
they
did
in
all
of
2013
Commitments to Venture Capital Funds
(Based on multiple closings)
Source:
Dow
Jones
VentureSource
4. VC
Overview:
The
Good
News
(cont’d)
• The
amount
invested
in
Venture-‐backed
companies
thus
far
also
surpassed
2013
totals
Deal flow and
Equity into
Venture-backed
companies
Source:
Dow
Jones
VentureSource
5. VC
Overview:
The
Bad
News
• The
number
of
deals
decreased
sharply
compared
to
2013
and
2012
totals
Deal flow and
Equity into
Venture-backed
companies
Source:
Dow
Jones
VentureSource
7. Startups
–
before
and
a^er
two
crashes
Before
2000
• Sun
servers
• Oracle
DB
• Exodus
hosFng
• 12
to
24
mo
dev
cycle
• 6
to
8
mo
sales
cycle
• $1M
to
$2M
seed
round
• $3M
to
$5M
Series
A
• Sand
Hill
Road
crawl
A^er
2008
• AWS,
PayPal,
Google,
FB
• Cloud
+
open
source
• Lean
startup
• 3
to
90
day
dev
cycle
• SaaS;
online
sales
• <$100K
inc;
<$1M
seed
• $1M
to
$3M
Series
A
• AngelList
8. Angels
&
Incubators
Filling
In
The
Gaps
Seed investing moderated some but
remains at historically high levels
Participation by Angels &
Incubators is also at an all-time
high
Source:
Thompson
One,
EY
Venture
Insights
10. AngelList
• Matches
companies
to
angels
• Company
provides
profile
• Curated
list
gets
sent
to
investors
• Members
can
“follow”
companies
+
introduce
others
• Leaderboard:
“hot”
companies
+
prolific
referrers
• Syndicates
11. The
new
startup
financing
ecosystem
IncubaFon
(under
$20K)
Seed
($250K
to
$2M)
Series
A
($2M
to
$5M)
Series
B
(over
$5M)
Incubators
and
accelerators
Superangels
and
micro-‐VCs
Small
venture
funds
Large
venture
funds
12. Incubators
and
accelerators
134
accelerators
have
funded
over
2,000
start-‐ups
+
seed
companies
have
raised
over
$1.6
billion
in
funding.
100
of
these
companies
have
already
sold
for
an
esFmated
total
of
over
$1
billion.
Nov.
2012
15. • Founded
2005;
Mountain
View
• Paul
Graham
• Over
700
companies;
68
in
last
class;
every
6
months;
over
1400
founders;
$20B
valuaFon
• Dropbox,
Airbnb,
Heroku
• NEW:
Typically
7%
for
$120K;
6.06%
in
founder
stock
+
$100K
SAFE
with
$10M
post-‐
money
cap
17. Top
20
Angel
Investors
2009
–
2013
• parFcipated
in
over
540
deals
from
2009
to
2013.
18. Top
20
Angel
Investors
2009
–
2013
• parFcipated
in
over
540
deals
from
2009
to
2013.
• invesFng
heavily
in
internet,
mobile,
and
eCommerce
(91%
of
deals
and
funding)
19. Top
20
Angel
Investors
2009
–
2013
• parFcipated
in
over
540
deals
from
2009
to
2013.
• invesFng
heavily
in
internet,
mobile,
and
eCommerce
(91%
of
deals
and
funding)
• Geographical
ConcentraFonL
• 51%
Silicon
Valley
• 21%
Silicon
Alley
• 8%
Silicon
Beach
21. Most
acGve
micro-‐VC
Investors
• Almost
half
of
the
VC
funds
raised
in
the
last
6
months
being
those
with
<
$50M
assets
under
management.
22. Most
acGve
micro-‐VC
Investors
• Almost
half
of
the
VC
funds
raised
in
the
last
6
months
being
those
with
<
$50M
assets
under
management.
• Internet
and
mobile
dominate
micro
VC
investments
–
capturing
85%
of
unique
company
investments
by
micro
VCs
since
2011.
23. Most
AcGve
Seed
VC
Investors
in
2013
There
has
been
a
dramaFc
increase
in
the
number
of
acFve
seed
VCs
since
the
start
of
2010
• Driven
by
a
combinaFon
of
proliferaFng
micro
VCs
and
mega
funds
building
seed
pornolios,
seed
VC
deals
took
26%
of
overall
venture
capital
deal
acFvity
in
2013.
• Overall
seed
VC
dollars
deployed
hit
a
four-‐year
high
in
2013
and
rose
22%
and
74%
compared
to
2012
and
2011
levels.
• 2013
also
saw
the
highest
amount
of
seed
VC
deals
since
2009.
• Seed
VC
deal
acFvity
in
2013
jumped
11%
from
2012
levels
and
a
whopping
173%
from
2010.
24.
25. The
Series
A
Crunch
On
average,
39.4%
of
seeded
companies
go
on
to
raise
follow-‐on
financing.
CB
Insights
–
Dec.
2012
…
only
about
20
percent
of
companies
that
have
goqen
a
seed
round
in
the
last
year
will
be
able
to
raise
a
Series
A.
Sarah
Lacy
–
November
2012
26. Crunch
good?
Crunch
bad?
• 1,000+
startups
will
be
orphaned;
$1B+
lost
• Lots
of
incubaFon,
but
fail
budget
is
$50K
to
$500K,
not
$5M+
• Series
A
bar
is
higher:
$1M
revenue,
1M
acFve
users,
10M
downloads,
100%
year
over
year
growth
• Many
failed
startups,
but
many
“ramen-‐profitable,”
acqui-‐hired,
small
acquisiFon,
or
MBA
alternaFve
28. General
solicitaFon
and
Investor
accreditaFon
• Go
see
someone
else’s
presentaFon
for
the
technical
legal
stuff
• Watch
out
for
accidental
“general
solicitaFons”
– Setng
AngelList
profile
to
public
– Using
WeFunder
– Facebook
post
of
“we’re
fundraising”
29. Will
crowdfunding
maqer?
YES
–
chance
to
invest
small
amounts
into
hot
startups
YES
–
presale
of
products,
especially
consumer
hardware
and
content
(i.e.
areas
that
VCs
dislike)
NO
–
SEC
and
JOBS
Act
crowdfunding
30. East
Meets
West
Conference
Honolulu
Hawaii
Elton
Satusky,
Partner
Wilson
Sonsini
Goodrich
&
RosaF
esatusky@wsgr.com
